Q2 FY2026
Filed Aug 20, 2026Revenue increased 9% year-over-year to RMB268,953 million (US$39,639 million), while AI Cloud and Compute Services revenue increased 45% and adjusted EBITA increased 133%; consolidated income from operations decreased 57% and free cash flow was an outflow of RMB44,670 million (US$6,584 million).
Revenue growth accelerated in AI Cloud and Compute Services and China Quick Commerce, but China E-commerce revenue declined, investment in technology and AI reduced consolidated adjusted EBITA, and GAAP income from operations and net income fell sharply.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| RevenueGAAP | RMB268,953 million (US$39,639 million) | – | 9% |
| Income from operationsGAAP | RMB15,161 million (US$2,234 million) | – | (57)% |
| Operating marginGAAP | 6% | – | – |
| Adjusted EBITDAnon-GAAP | RMB39,143 million (US$5,769 million) | – | (14)% |
| Adjusted EBITDA marginnon-GAAP | 15% | – | – |
| Adjusted EBITAnon-GAAP | RMB27,329 million (US$4,028 million) | – | (30)% |
| Adjusted EBITA marginnon-GAAP | 10% | – | – |
| Net incomeGAAP | RMB10,444 million (US$1,539 million) | – | (75)% |
| Net income attributable to ordinary shareholdersGAAP | RMB10,537 million (US$1,553 million) | – | (76)% |
| Non-GAAP net incomenon-GAAP | RMB20,715 million (US$3,053 million) | – | (38)% |
| Diluted earnings per share attributable to ordinary shareholdersGAAP | RMB0.46 (US$0.07 or HK$0.53) | – | (79)% |
| Diluted earnings per ADS attributable to ordinary shareholdersGAAP | RMB3.71 (US$0.55) | – | (79)% |
| Non-GAAP diluted earnings per sharenon-GAAP | RMB1.07 (US$0.16 or HK$1.23) | – | (42)% |
| Non-GAAP diluted earnings per ADSnon-GAAP | RMB8.52 (US$1.26) | – | (42)% |
| Cost of revenueGAAP | RMB166,096 million (US$24,480 million) | – | 6.7% |
| Cost of revenue as a percentage of revenueGAAP | 61.8% | – | – |
| Product development expensesGAAP | RMB22,529 million (US$3,320 million) | – | 2.3% |
| Sales and marketing expensesGAAP | RMB47,625 million (US$7,019 million) | – | (3.8)% |
| General and administrative expensesGAAP | RMB12,708 million (US$1,873 million) | – | 1.7% |
| Impairment of goodwillGAAP | RMB4,458 million (US$657 million) | – | 1.7% |
| Interest and investment income, netGAAP | RMB9,004 million (US$1,327 million) | – | (48)% |
| Interest expenseGAAP | RMB2,352 million (US$346 million) | – | – |
| Income tax expensesGAAP | RMB12,798 million (US$1,886 million) | – | – |
| Share of results of equity method investeesGAAP | RMB934 million (US$137 million) | – | (8)% |
| Net cash provided by operating activitiesGAAP | RMB22,945 million (US$3,382 million) | – | 11% |
| Free cash flownon-GAAP | an outflow of RMB44,670 million (US$6,584 million) | – | – |
| Capital expendituresother | RMB67,678 million (US$9,975 million) | – | 75% |
| Cash and other liquid investmentsother | RMB474,505 million (US$69,933 million) | – | – |
| Current bank borrowingsGAAP | RMB30,614 million (US$4,512 million) | – | – |
| Non-current bank borrowingsGAAP | RMB56,007 million (US$8,254 million) | – | – |
| Non-current unsecured senior notesGAAP | RMB115,716 million (US$17,054 million) | – | – |
| Non-current convertible unsecured senior notesGAAP | RMB54,905 million (US$8,092 million) | – | – |
| Non-current exchangeable bondsGAAP | RMB9,288 million (US$1,369 million) | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| China E-commerceThe decrease reflected weaker transaction activities and a planned reduction of certain direct sales businesses. Customer management revenue decreased 7% year-over-year; excluding the contra revenue impact from the new business development program, it would have grown 1% year-over-year on a like-for-like basis. | RMB110,900 million (US$16,345 million) | – | (8)% |
| China Quick CommerceGrowth was primarily driven by Freshippo and Taobao Instant Commerce. | RMB53,295 million (US$7,855 million) | – | 45% |
| International E-commerceAliExpress achieved operating profit, driven by logistics optimization and cost efficiency enhancement. | RMB27,761 million (US$4,091 million) | – | (1)% |
| Global WholesaleGrowth was primarily due to the increase in revenue generated by cross-border related value-added services. | RMB13,906 million (US$2,049 million) | – | 7% |
| Alibaba E-commerce GroupThe group combines Alibaba China E-Commerce Group, Alibaba International Digital Commerce Group, Freshippo and certain commerce businesses within Cainiao. | RMB205,862 million (US$30,340 million) | – | 4% |
| AI Cloud and Compute ServicesGrowth was primarily driven by public cloud revenue growth, including increasing adoption of AI-related products. | RMB48,437 million (US$7,139 million) | – | 45% |
| AI Labs and ApplicationsAI model labs, Qwen Consumer Business Group and QwenWork were brought together to integrate the value chain from AI model innovation through consumer applications and enterprise productivity solutions. | RMB3,338 million (US$492 million) | – | 16% |
| All othersAll others include mainly Alibaba Health, Hujing Digital Media and Entertainment Group, Amap, Lingxi Games and other technology businesses. | RMB28,803 million (US$4,245 million) | – | 1% |
Capital returns
- Repurchased a total of 13.4 million ordinary shares (equivalent to approximately 1.7 million ADSs) for a total of US$162 million during the quarter ended June 30, 2026.
- These purchases were made in the U.S. market under the share repurchase program.
What drove it
- AI-related product revenue was RMB12,376 million (US$1,824 million) and delivered the twelfth consecutive quarter of triple-digit year-over-year growth.
- AI Cloud and Compute Services total revenue and revenue from external customers both accelerated to 45% year-over-year growth.
- Taobao Instant Commerce improved unit economics quarter-over-quarter through higher average order value and enhanced fulfillment logistics efficiency while maintaining market share.
- The number of 88VIP members increased by double digits year-over-year to approximately 64 million as of June 30, 2026.
- Freshippo maintained robust year-over-year growth momentum in orders and revenue, supported by expansion into emerging cities and counties and deeper collaboration with Taobao Instant Commerce.
- AliExpress achieved operating profit through logistics optimization and cost efficiency enhancement.
Concerns
- China E-commerce revenue decreased 8% year-over-year, with customer management revenue decreasing 7% year-over-year amid weaker transaction activities.
- AI Labs and Applications adjusted EBITA was a loss of RMB13,861 million (US$2,043 million), compared to a loss of RMB3,224 million in the same quarter of 2025, due to increased investment in AI capabilities and higher inference cost related to Qwen app.
- All others adjusted EBITA was a loss of RMB3,343 million (US$493 million), compared to a profit of RMB687 million in the same quarter of 2025, primarily due to increased investment in technology businesses.
- Income from operations included impairment of goodwill of RMB4,458 million (US$657 million) and a provision related to the fine imposed by the European Commission under the Digital Services Act of EUR550 million.
- Cost of revenue increased to 61.8% of revenue from 55.1%, primarily driven by a greater proportion of cloud and technology businesses in revenue mix and the contra revenue impact from the new business development program.
- Free cash flow was an outflow of RMB44,670 million (US$6,584 million), mainly attributed to increased cloud infrastructure expenditure.
What to watch
- AI Cloud and Compute Services revenue growth and segment adjusted EBITA, which increased 133% to RMB5,628 million (US$830 million).
- The pace of AI-related product revenue growth and AI infrastructure expenditure.
- China E-commerce customer management revenue and transaction activity following the reported 7% year-over-year decline.
- China Quick Commerce unit economics, average order value, fulfillment logistics efficiency and market share.
- The scale of AI Labs and Applications investment and higher inference cost related to Qwen app.
- Capital expenditures, which were RMB67,678 million (US$9,975 million), and their effect on free cash flow.
Balance sheet and cash flow
- Cash and other liquid investments were RMB474,505 million (US$69,933 million) as of June 30, 2026, compared to RMB520,824 million as of March 31, 2026.
- The decrease of RMB46,319 million during the quarter was primarily due to free cash flow outflow of RMB44,670 million (US$6,584 million) and effect of exchange rate changes of RMB5,853 million (US$863 million), partly offset by net proceeds from bank borrowings of RMB11,005 million (US$1,622 million).
- Net cash used in investing activities was RMB18,964 million (US$2,795 million), primarily reflecting capital expenditures of RMB67,678 million (US$9,975 million), partly offset by net decrease in short-term investments and other treasury investments by RMB50,452 million (US$7,436 million).
- Net cash provided by financing activities was RMB9,469 million (US$1,395 million), primarily reflecting net proceeds from bank borrowings of RMB11,005 million (US$1,622 million).
- Total assets were RMB1,962,109 million (US$289,179 million) and total liabilities were RMB848,215 million (US$125,011 million) as of June 30, 2026.
Analysis
Alibaba reported RMB268,953 million (US$39,639 million) of revenue, up 9% year-over-year, with growth led by China Quick Commerce and AI Cloud and Compute Services. AI Cloud and Compute Services revenue increased 45% to RMB48,437 million (US$7,139 million), while AI-related product revenue reached RMB12,376 million (US$1,824 million) and delivered the twelfth consecutive quarter of triple-digit year-over-year growth. China Quick Commerce revenue increased 45% to RMB53,295 million (US$7,855 million), supported by Freshippo and Taobao Instant Commerce.
The core China E-commerce business remained a drag. Revenue decreased 8% to RMB110,900 million (US$16,345 million), while customer management revenue decreased 7% amid weaker transaction activities. Management said customer management revenue would have grown 1% year-over-year on a like-for-like basis excluding the contra revenue impact from the new business development program. Direct sales, logistics and others revenue decreased 10%, reflecting a planned reduction of certain direct sales businesses. International E-commerce revenue decreased 1%, although AliExpress achieved operating profit.
Profitability weakened at the consolidated level despite the Cloud business improvement. Adjusted EBITA decreased 30% to RMB27,329 million (US$4,028 million), and its margin declined to 10% from 16%. AI Cloud and Compute Services adjusted EBITA increased 133% to RMB5,628 million (US$830 million), but AI Labs and Applications adjusted EBITA loss widened to RMB13,861 million (US$2,043 million) from a loss of RMB3,224 million. Alibaba E-commerce Group adjusted EBITA decreased 1% to RMB39,749 million (US$5,858 million), reflecting increased investment in user experiences and technology.
GAAP results were also affected by impairment, a provision and lower investment gains. Income from operations decreased 57% to RMB15,161 million (US$2,234 million), with operating margin declining to 6% from 14%. Net income decreased 75% to RMB10,444 million (US$1,539 million), and non-GAAP net income decreased 38% to RMB20,715 million (US$3,053 million). The release cited lower income from operations, lower net gains from investment disposals and lower mark-to-market gains on equity investments. It also recorded RMB4,458 million (US$657 million) of goodwill impairment and a provision related to an EUR550 million European Commission fine.
Capital allocation prioritized AI infrastructure. Capital expenditures increased 75% to RMB67,678 million (US$9,975 million), reflecting cloud infrastructure investment, procurement-cycle fluctuations, additional CPU-compute capacity for anticipated AI-agent adoption and higher chip-component pricing. Operating cash flow increased 11% to RMB22,945 million (US$3,382 million), but free cash flow was an outflow of RMB44,670 million (US$6,584 million). Cash and other liquid investments declined to RMB474,505 million (US$69,933 million) as of June 30, 2026, while the company repurchased US$162 million of shares. No forward financial guidance was provided.
Management, verbatim
We delivered a strong quarter, driven by the improving commercialization of our full-stack AI capabilities.
Eddie Wu, Chief Executive Officer of Alibaba Group
Alibaba Cloud’s external revenue growth accelerated to 45%, with AI-related product revenue delivering triple-digit growth for the twelfth consecutive quarter.
Eddie Wu, Chief Executive Officer of Alibaba Group
This quarter, we delivered robust revenue growth and margin improvement across our core businesses.
Toby Xu, Chief Financial Officer of Alibaba Group
Not in the filing
stated, not guessed- Forward revenue guidance
- Forward gross margin guidance
- Forward operating expenses guidance
- Forward tax rate guidance
- Gross profit
- Gross margin
- GAAP tax rate
- Aggregate total debt
- Dividend information
- Prior-quarter revenue, earnings and segment comparisons
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.